Rise of mobile payments in China: Myths and facts

March 09, 2018 10:47
Ease of transaction, rather than anything else, has been the key reason why mobile payments have become popular in China. Photo: Xinhua

An article about why mobile payment is so popular in China has gone viral. The article, written by a Taiwanese manager working on the mainland, has however made many wrong conclusions.

I have been managing information technology and back-office operation for banks in Asia Pacific for many years, so I believe I have quite a good understanding of banking development in the region.

The article attributed the popularity of mobile payment to lack of bank automated teller machines (ATMs).

There are only 3,000 ATMs in Sweden, which is close to becoming a cashless economy.

If you can easily make payment on the mobile, why bother looking for an ATM?

Lack of ATMs is actually not the reason for the popularity of mobile payment. The real reason is the ease of mobile payment, which makes ATMs unnecessary.

By the way, China had a total of 924,200 ATMs across the nation by the end of 2016. That means there was one ATM for 1,413 Chinese; the ratio is not a lot lower than Taiwan’s one ATM for 860 people.

The article also argues that high bank transfer fee is another incentive for developing mobile payment.

There had indeed been charges, around 5 yuan per 10,000 yuan. However, in Feb 2016, China's five biggest banks announced elimination of such charges if customers make transfers from mobile apps.

The author also argued that mainland China does not have public transport card like Octopus card in Hong Kong. This is not true.

For example, there is a transport card that can be used in 21 cities in Guangdong province. There are over 60 million such cards in circulation.

Card holders can use them to take buses and subways in all those cities, as well as make purchases in convenience stores, supermarkets and vending machines.

In fact, similar electronic payment system has already been widely used across China.

The article mentioned that China has a serious counterfeit currency problem, thus providing a huge incentive for merchants and taxi drivers to prefer mobile payment rather than cash. This point is basically correct.

This article appeared in the Hong Kong Economic Journal on March 8

Translation by Julie Zhu

[Chinese version 中文版]

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Chairman of FinTech Committee, Smart City Consortium